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  4.  » Bankruptcy can help businesses invested in commercial real estate

Bankruptcy can help businesses invested in commercial real estate

Both businesses and individual investors tend to rely on long-term market trends when making financial choices. For example, many parties invest in real estate as a means of hedging risk and turning capital into a long-term source of financial gain. Many businesses, in particular, might choose to invest in commercial real estate as a way of generating rental revenue. Office buildings, retail storefronts and other commercial properties can be very lucrative when purchased for a reasonable price and consistently rented to other businesses.

Unfortunately, many parties with substantial commercial holdings may find that economic changes in recent years have strained their budgets. There has been a substantial decrease in the demand for certain types of facilities, including office building rental spaces. Is business bankruptcy a viable solution for a business with commercial properties that have ceased generating revenue?

Business bankruptcy offers multiple solutions

There are multiple different forms of business bankruptcy, each of which can offer different benefits to organizations experiencing short-term financial hardship. Many businesses trying to remain solvent after multiple quarters of losses will attempt to restructure. They may eliminate certain components of the business and seek to renegotiate certain financial obligations.

Restructuring can be a useful step for businesses struggling with unprofitable commercial real estate holdings. In some cases, restructuring will lead to more favorable loan terms, as businesses can negotiate new arrangements with their lenders. They may also be able to halt certain collection efforts in order to retain as much of their commercial portfolio as possible.

Other times, bankruptcy may help businesses tap into resources that could prove useful if the company attempts to alter how it utilizes commercial spaces. Restructuring to eliminate certain debts could help a business connect with financing that might allow it to pursue zoning changes and invest in major overhauls to convert office spaces to residential lofts, for example.

Most businesses that have invested in real property do not want to sell when demand is low, as they may take a loss on the transaction. Looking into various ways to mitigate commercial real estate losses can help organizations remain solvent while preserving as much of their resources as possible.